Russia-China Investment Fund supports IPO of Detsky Mir

Press release, 08.02.2017

RCIF makes its first partial exit from an investment, achieving a significant yield

Moscow, 08 February 2017 – The Russia-China Investment Fund (RCIF), established by the Russian Direct Investment Fund (RDIF) and the China Investment Corporation (CIC), sold a portion of its stake and played a significant role in the Initial Public Offering (IPO) of Detsky Mir, the leading children’s goods retailer in Russia. This IPO is the first exit from an investment for RCIF.

RCIF has been instrumental in the deal’s success – both prior to, and during the transaction. RCIF supported the Company’s growth leading up to the IPO and contributed to enlarging its shareholder base. RDIF also attracted its international partners to the transaction, including leading Middle Eastern, European, Asian and US investment funds.

As a result of the deal, RCIF has sold part of its shareholding in Detsky Mir. Through the sale stake, RCIF has achieved a significant exit yield on an investment and has contributed to the increased liquidity of Detsky Mir’s shares for new shareholders. RCIF has confidence in the Company’s growth prospects and so will remain the second largest shareholder in Detsky Mir. The Fund will continue supporting Detsky Mir in leveraging new business opportunities, including internationally.

Kirill Dmitriev, Co-CEO of RCIF and CEO of RDIF, noted:

“The IPO of Detsky Mir marks a landmark transaction for the Russian market. The deal was made possible largely due to the active work of the Company’s shareholders, including the arrival of RCIF as a pre-IPO investor in the Company a year earlier. Detsky Mir is an example of the fast-growing Russian company, which demonstrates impressive results and its growth will accelerate alongside the resumption of growth in the Russian economy. Despite a challenging macroeconomic situation, Detsky Mir has managed to achieve an EBITDA growth of more than 50% in the 9 months of the last year. The success of this deal confirms strong demand from international investors for public placements of top quality Russian companies. It has also opened the door for other Russian issuers looking at public markets.”

Hu Bing, Co-CEO of RCIF, said:

“RCIF remains the largest minority shareholder of Detsky Mir, whose IPO was an important event for the Russian equity market and revealed the high interest of foreign investors in Russian assets. The investment in Detsky Mir is also an important success story for Chinese investors working in Russia and interested in investments in the country. We intend to further implement successful projects and investment in Russia.”

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Russia-China Investment Fund (RCIF) is a joint fund established by the Russian Direct Investment Fund and (CIC). The activity of RCIF is aimed at development of bilateral economic, trade and investment relations between Russia and China.

Detsky Mir is an undisputed leader in the niche market of children’s goods in Russia. The market value of Detsky Mir is more than three times higher than its nearest competitor’s position and keeps on growing. In the last three years, the Company opened over 270 new stores, and, based on the conservative management scenario will maintain like-for-like growth in both offline and online segments. As at 31 December 2016, Detsky Mir operated a network of 525 stores. In addition, the strategy of Detsky Mir is aimed at increasing the like-for-like revenue and gross margin per square meter; further optimization and development of the logistics platform, as well as continuous improvement, and increase of operating margin and yield on capital investments. Estimated return of the Company for 2016 is RUB 79.5bn, which represents a 30% growth versus 2015. Company’s EBITDA for 9m of 2016 increased to reach RUB 4.7bn which is 56% higher than in the same period of 2015.